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ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
ch14 pricing strategies
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ch14 pricing strategies

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  • 1. DEVELOPING PRICING STRATEGIES AND PROGRAMS MM Kui Ateneo Graduate School of Business Top 10 Concepts
  • 2. Outline: Pricing…
    • Must be integral in marketing mix (why?)
    • Involves both buyers and sellers (how?)
    • Derived from company’s objectives (what?)
    • Changing (how?)
    • Should consider competitors (why?)
  • 3. Outline: Pricing…
    • Employs several methods (what?)
    • Isn’t just about “lowest price” (why?)
    • Differentiation responds to differing needs (how?)
    • Can be boosted by advertising (how?)
    • Must be increased carefully (how?)
  • 4. Concept 1: Pricing is an integral part of the marketing mix
    • Only element that produces revenue
    • Communicates product/brand placement, image, quality, value
    • Major determinant of buyer choice
  • 5. Concept 2: Buyers are not just “price takers”
    • Understand consumer pricing psychology
    • Price-quality inferences
      • Higher price = Higher quality
      • Higher price = Exclusivity
    • Price endings
      • “9” endings
      • Process price in left-to-right manner
  • 6. Concept 2: Buyers are not just “price takers”
    • Reference prices
      • Fair price
      • Last price paid
      • Upper- / Lower-bound price
      • Competitor price
      • Expected future price
      • Usual discounted price
  • 7. Concept 3: A clear objective is essential for pricing decisions
    • Clearer objective = easier price setting
    • 5 objectives:
      • Survival
      • Maximum current profit
      • Maximum market share (Chinese style)
      • Maximum market skimming (technology)
      • Product-quality leadership (cars)
  • 8. Concept 4: Pricing must always respond to the times
    • Consider your customers
      • Will they buy at my current price?
      • How will they respond to price change?
      • How can I use pricing to entice?
  • 9. Concept 4: Pricing must always respond to the times
    • Consider your competitors
      • Why change price?
      • Price change temporary or permanent?
      • What will happen if I don’t respond?
      • Will other competitors respond?
      • How will competitors respond to my response?
  • 10. Concept 4: Pricing must always respond to the times
    • Consider the environment
      • What is the current trend in pricing?
      • Is this trend suitable for my industry?
      • How to be visible on the internet?
      • Can freemium concept apply to my product?
  • 11. Concept 5: Base your price on your competitors’, and anticipate a response
    • Add/deduct price from nearest competitor’s price
    • Change in price can provoke a response
    • Always research on competitor customers’ loyalty
  • 12. Concept 6: Select the best pricing method for you
    • 3 major considerations
      • Costs = price floor
      • Customer value perception = price ceiling
      • Competitor & substitute price = orientation point
  • 13. Concept 6: Select the best pricing method for you
    • 6 price-setting methods
      • Mark-up
      • Target-return
      • Perceived-value
      • Value pricing
      • Going-rate
      • Auctions
  • 14. Concept 7: Pricing is not always about “lowest price”
    • Most consumers are not too price sensitive provided:
      • There are few substitutes
      • They are resistant to change
      • They think the higher price is justified
    • Pay more for features, warranty, quality, support
  • 15. Concept 7: Pricing is not always about “lowest price”
    • Avoid these traps:
      • “Soft” list price
      • “Low-quality” image
      • Fragile market share
      • Shallow-pockets
      • Price wars
  • 16. Concept 7: Pricing is not always about “lowest price”
    • Discounts are good for:
      • Early payments
      • Volume purchases
      • Off-season buying
      • Promotions
  • 17. Concept 8: Price differentiation is a useful tool
    • Offer unique bundle to meet needs precisely
    • 3 degrees:
      • 1 st – based on demand intensity
      • 2 nd – based on volume
      • 3 rd – based on buyer class
  • 18. Concept 8: Price differentiation is a useful tool
    • Types of 3 rd degree:
      • Customer segment (museums)
      • Product form (Evian)
      • Image (Marriot/Holiday Inn)
      • Channel (Coke)
      • Location (concerts)
      • Time (buffets)
  • 19. Concept 9: Advertising allows a product to boost its price
    • Average quality + low advertising = average price
    • Average quality + high advertising = higher price
    • High quality + high advertising = highest price
  • 20. Concept 10: Price increases must not alienate customers
    • Factors resulting to price increase:
      • Cost inflation
      • Over demand
      • Under supply
      • Additional features
  • 21. Concept 10: Price increases must not alienate customers
    • Consumers prefer regular small price increases
    • Give advance notice
    • Make low-visibility price increases
      • Eliminate discounts
      • Increase minimum order
      • Curtailing low-margin products
  • 22. Concept 10: Price increases must not alienate customers
    • Alternative approaches:
      • Shrink amount of product
      • Substitute less expensive materials
      • Reduce/remove product features/services
      • Use less-expensive packaging
      • Reduce sizes or models offered
      • Create economy brands
  • 23. Summary: Pricing…
    • Signals a brand’s position in the market
    • Is also dictated by the buyers
    • Is easier with a clear objective
    • Is changing
    • Influences competitors
  • 24. Outline: Pricing…
    • Employs several methods
    • Should not be all about “lowest price”
    • Differentiation responds to differing client needs
    • Can be boosted by advertising
    • Must be increased without offending customers
  • 25. My Conclusion: Pricing should be the foremost concern, as it:
    • reflects a product’s position
    • influences buyer choices
    • initiates responses from competitors, and
    • Impacts bottom-line income

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